How do you define financial freedom?

Can freedom be bought? Are there any (financially) poor people who are free? Are there any (financially) wealthy people who aren't free? If someone were to ask you, “What's your definition of financial freedom?”, what would you say? Be honest with yourself: Would you reply with a concrete definition? Or would your answer be more abstract?

“Man acts as though he were the shaper and master of language, while in fact language remains the master of man.” ~ Martin Heidegger

The conventional definition of financial freedom goes something like this:

Financial freedom comes when you've saved a nest egg large enough that the interest earned from your savings will replace 80% of your current income, adjusted for inflation, when you decide to retire. (Assuming your savings are your only source of retirement income.)

Because of its abstract nature, financial freedom is among the most abused ideas in the world of personal finance. In my early training as a financial planner, I was taught to use questions like these to provoke action. (Or, more accurately, to provoke anxiety.)

Are you on track to reaching your retirement goals?

Are you paying too much in taxes?

Are you a slave to your debt?

What will happen to your money after you die?

Are you on course to achieve financial freedom? If not, would you like to know for sure?

The idea of financial freedom is no conspiracy to deceive the masses, but it sure has sold vast quantities of financial products and services! How many books, websites, blogs, magazine articles, media advertisements, and financial planners have used the term financial freedom as leverage to sell something?

But how can a person be free if their idea of freedom is defined by monetary means, by someone else — or not defined at all?

It's important to be aware of abstraction, ideology, and dogma when you encounter it. If the term financial freedom isn't made concrete (defined by and for a specific person), there's a danger that true freedom may never be obtained regardless of financial wealth.

“Life is about life and not the result of life.” ~ Johann von Goethe

Would you agree that life isn't about the destination, but about the journey? Financial goals are destinations; they're not life. But isn't the freedom that money apparently purchases worth the sacrifices we make to reach this freedom? Try answering this question by asking another question: Can freedom be bought? If not, then what does this say about the pursuit of financial freedom?

“Ever more people today have the means to live, but no meaning to live for.” ~ Viktor Frankl

Meaning precedes money; purpose precedes planning. It's contradictory to believe that a given life objective can be reached by financial means. The blind pursuit of financial freedom is often closer to slavery than it is to liberation. It's making life a tool for money, whereas money should be made a tool for life.

I believe that financial freedom, if it exists, lies at the point at which the utility of money begins to diminish, the point at which the basic sources of physical well-being — food, shelter and clothing — have been met. At this point, financial freedom may be had by (and defined as) the capacity to eliminate the desire for more money. Or, expressed in one word, contentment.

Really, though, the only wrong definition of financial freedom is the one that isn't yours. Don't allow any financial planner, family member, friend, blogger, or anyone else to influence your definition of financial freedom!

With that in mind, what is your definition of financial freedom? Does it even exist? Can freedom even be bought? Are you free yet?

Kent Thune is an independent, "fee-only" investment adviser and free-lance writer. He is also the Mutual Funds Guide for About.com and he blogs about the meaning of life and the purpose of money at The Financial Philosopher.

My definition is being debt free. Once I have paid off my debt, I will be free to spend my money however I want and will no longer be a slave to my debt. It will also give me the freedom to take a lower paying job if I want, allow my wife to stay home with our kids (once we have them) and be less stressed.

With that in mind, I am definitely not free yet. I still have a long way to go, but am making good progress.

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Andrew

9 years ago

My definition is similar to the one stated in the article and is adapted from Van Tharp, the trading psychologist and coach. Basically, if one can generate enough passive income through investments to cover all living expenses, then he or she is financially free. This does not mean one immediately retires, but that is certainly an option. Otherwise, a financially free person can take a lower paying job, go back to school, travel, or do whatever he or she wants.

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Mike Piper

9 years ago

For me, it’s having enough (mostly) passive income to be able to do what I want with my time.

At the moment, that income comes from a business. Later, it’ll be more heavily funded by investments.

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Sam

9 years ago

For me, financial freedom is a moving target. When I was just starting out, freedom meant earning a salary that equaled my age. If I was 25 I wanted to earn $25,000 (I worked in social services, yes I had a college degree and yes this was a few years ago). My husband and I, right after we were married worked on what we called a “freedom project” to rid ourselves of all our unsecured debt ($55,000+). I find being debt free (except for the mortgage) to be very freeing. I really like not have to pay any credit card… Read more »

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Justin Popovic

9 years ago

I hate starting my comment off with “Great Post” because it is the most overused 2 words in the comments section of blogs. So… AWESOME POST! You spoke directly to me with this article. I love your quote that “The blind pursuit of financial freedom is often closer to slavery than it is to liberation.” When I was a corporate employee who hated what I did, I honestly thought the answer to all my problems was to make enough money so that I could retire and never work again…. THEN I could be free and enjoy life. What a sham!!!… Read more »

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Becca

9 years ago

So pleased to read this! Honestly, I was baffled to learn from last week’s comments that there are people out there who live purely for the future. That is, without a doubt, being a slave to money.

As for your question? I haven’t actually figured it out yet. I guess I’m on the abstract side – I just want to be able to say “sure, why not?” to anything life throws at me.

Ours is to be totally debt free and able to live off our investments without a job.

We aren’t there yet but working to get there.

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everyday tips

9 years ago

I definitely think financial freedom means different things to different people. The fact that we are debt free outside of our mortgage may mean we are debt free to some because they don’t view a mortgage as debt, but more a necessity of life. Our house will be paid off within 7 years. However, I think I will free financial freedom once all 3 of my kids are done with college, because then (hopefully), all major money sucking expenses should be done. Our expenses will be minimal, and income should be quite good. We should then have the freedom to… Read more »

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MonkeyMind

9 years ago

The Viktor Frankl book “Man’s Search for Meaning” is a wonderful book that every person should read/own. Freedom (or prison), of any type (financial, physical, etc.) is all a state of mind: “Everything can be taken from a man or a woman but one thing: the last of human freedoms to choose one’s attitude in any given set of circumstances, to choose one’s own way.” – V. Frankl

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MikeTheRed

9 years ago

At 28 I only recently (in the last year or so) came out from under credit card debt. Up to that point I was a complete prisoner and tied to the whims of other people 100%. There was no freedom there at all. I couldn’t even think about true financial freedom while under that burden. It was like asking a drowning man to try and envision himself soaring above the clouds. He’s too busy trying to not drown to do anything else! Now that I’m debt-free (no mortgage yet), I’ve spent a lot of time thinking about what my financial… Read more »

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Jacq @ Single Mom Rich Mom

9 years ago

Although like most people, I too use the mathematical definition: “replace working income with investment income” that they outlined in YMOYL years ago, I agree that there’s also a huge freedom to be found in YMOYL’s concept of “enough”. How I got to the dollars and cents freedom was by learning the freedom that comes with self-control. Having been a somewhat mindless and emotional type of spender before, it was kind of a revelation that I could actually enjoy life without buying stuff or experiences. Now that I’ve spent over 10 years assessing whether I’ve obtained value from my spending… Read more »

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ArandomPerson

9 years ago

I follow the more traditional definitions: Financial freedom is defined by having sufficient monetary resources to produce enough income to support one’s desired lifestyle.

The resources can be anything that can produce or be transformed into income.

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The Beagle

9 years ago

I very much like the definition of “rich” from The Millionaire Next Door, which states that you are rich if you could keep up your current standard of living without working for a period of at least ten years.

A slightly watered-down version I strive for is to have enough savings and zero debt (including mortgage) that, even if I still need to work, I would have the freedom to accept a position that pays substantially less.

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Randy

9 years ago

Every one talks about being debt free as financial freedom. Which on the surface makes sense; and what I am striving for. But can you be financially free while in debt? I believe you can. Think about it….if freedom = contentment, can’t you be content while still in debt? I am not talking about living paycheck to paycheck. You are working in a job you love to do, you are putting away for retirement, your personal relationships are growing, you can do reasonable things without endangering yourself financially, and you are paying your debts.In my eyss this is freedom. I… Read more »

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Lamby

9 years ago

I love Van Tharp’s definition of financial freedon: When your passive income (without cutting into inflation adjusted capital) is more than your outgoings then you are financially free. i.e you never ‘have’ to work again. If you own your own house and do not have many outgoings then you may already be financially free. He uses a figure of 4% of your capital as the amount you have to use (you can make 7% a year, but lose 3% to inflation.) So if you have $500k capital, 4% is $20k a year. If you can pay all your bills and… Read more »

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threeoutside

9 years ago

“the interest earned from your savings will replace 80% of your current income, adjusted for inflation, when you decide to retire.” Once again, this old saw. OK, it works for many – but NOT for, I suspect, many many more. I, for example, would have to work at my present job until I was about 150 years old, no exaggeration. Therefore, such formulae are worthless to me. I am, however, debt-free, and my house will be paid off this winter. I have some retirement money, some savings, and those will serve me well enough. I never expected a jet-setting retirement.… Read more »

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Trina

9 years ago

There are two kinds of freedom being discussed here. LIFESTYLE freedom is having options and being content with life right now, however someone defines that.

FINANCIAL freedom is much more defined – being able to pay your bills without working at a job, period.

Having a job you enjoy, being debt-free, spending time in fulfilling pursuits, not worrying about money – all these are lifestyle freedom for sure, but not necessarily financial freedom, unless you don’t have to work to make it happen.

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Steve R

9 years ago

My goal for financial freedom is having enough tax-favourable passive income (dividends)to pay my house taxes and utilities each year. I’m almost there, thanks to dripping stocks for several years. Knowing that these payments are covered, I can then concentrate on my lifestyle.

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HollyP

9 years ago

For the long term, financial freedom will be when my husband and I are able to choose whether to work. For the medium term (but still 10-15 years out), it is being able to continue paying our bills, pay off our mortgage, and save enough for our kids’ college education. (We’ve decided that amount is equal to either tuition only at a private university, or tuition plus room and board at a state university.) What I’d really like at this point in life, is to be able to take a job which allows me to work true part-time hours.

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Janette

9 years ago

Best post in a long time! Financial freedom is the knowledge that we have plenty and can survive in a manner that is comfortable. We travel,learn and enjoy when we want. We have been financially free for years. With this freedom we have the choice work,or leave work, when we desire. We are not wealthy and, to be honest, I have no desire. For weath brings great responsibility- which could tie up my freedom. My sister has much more, but is striving for a larger “number”. About a month ago she figured out that she was free. I could see… Read more »

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Beth

9 years ago

For us financial freedom begins with naming every dollar, which we do now. It continues, or grows, with being completely debt free. At that point (in about 4 years), we can use the money we earn to invest for retirement and in our own small business. I think the slave analogy is a good one — you can be a slave to your own ideas about money and what it means in your life.

I have to say my husband and I have been on our journey for about 2 years now (just slightly less). We have considerable student loan debt, so right now financial freedom looks like not having any student loan debt (no car loans, no credit cards, no mortgage because we rent due to moves around the country with a job). But I tend to subscribe to the more investment income coming in then bills going out. once our student loans are paid off, we plan on buying acerage in the midwest that we could pay off, and then start saving… Read more »

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Kent @ The Financial Philosopher

9 years ago

Wow! Great comments! First, I want to thank JD for publishing my post. Now, on to some responses: I highly respect those who define financial freedom as being debt free, which is certainly liberating… @5 Justin: I appreciate the compliment! Your story reminds me of The Fisherman’s Parable. Check it out here: http://www.thefinancialphilosopher.com/2010/06/the-fishermans-parable.html @6 Becca: I agree that living for the future takes away from the present moment, which is where life is. For some, however, the thought of a brighter future makes for a brighter now. Thanks for the comment! @9 Monkeymind: It’s funny you mention Viktor Frankl. The… Read more »

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Kathryn

9 years ago

The ultimate definition of Financial Freedom (for me) is not having to *think* about money. Whether it comes in or goes out, there is enough, but the amounts are of no real concern. This could mean a meager income and very little in the way of want, or it could mean a large income with the desire for many luxuries.

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Beth

9 years ago

I think I will feel financial freedom when I pay my mortgage off. I would be able to take a less stressful/less paying job and not have to think about owing anybody.

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Rob Bennett

9 years ago

It’s not a destination, it’s a quest. For the poor, basic shelter is the biggest dream that can be dreamed. A multi-millionaire who settles on the aim of paying the bills without having to go to work will be miserable. We all need something to excite us about the idea of getting up tomorrow morning. We all have love to spend. Financial freedom is when you use your money to pursue ever higher goals rather than smaller, more narrow ones. No one can ever achieve full financial freedom in this life. But everyone should always seek to do so. Rob

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Ingrid

9 years ago

I am very much into environmental sustainability and social justice, as well as some things that make me personally happy (beauty around me, horses, dancing). To me, financial freedom is the opportunity to work in fields/roles that I love, that feel meaningful – no matter how much the salary is – combined with having time and money for the hobbies I enjoy. As well as a cushion for emergencies/real old age savings. But I never cared for early retirement or something like that – I am building my skills and expertise to find work I wouldn’t want to retire from.… Read more »

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Ingrid

9 years ago

(Sorry I ended up posting the comment twice because while submitted, I did not see it at all, even after waiting a couple of minutes and refreshing the page) I am very much into environmental sustainability and social justice, as well as some things that make me personally happy (beauty around me, horses, dancing). To me, financial freedom is the opportunity to work in fields/roles that I love, that feel meaningful – no matter how much the salary is – combined with having time and money for the hobbies I enjoy. As well as a cushion for emergencies/real old age… Read more »

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Steve

9 years ago

“Freedom” has a lot of meanings, but the definition of “financial freedom” seems pretty cut and dried to me. It’s having enough money to cover your expenses in perpetuity. There are many variations and different wordings of the definition, but the core remains the same. Variations include: “passive income” in place of “money”; “for the rest of your life” or “without spending principal” in place of “in perpetuity.” And there are things you can do to affect it — for instance, lowering your expenses, or even your expectations. But other than that, you’re talking about something other than the accepted… Read more »

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Marc

9 years ago

One of the best pieces about contentment I have read in a while. I will check out your site. good luck to you.

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Chris Brightwell

9 years ago

In general, we’ll consider ourselves “financially free” under all of the following conditions: 1. No non-mortgage debt. 2. 12-month “emergency fund”. 3. $25k in additional savings. 4. Strategy to pay for our son’s college education. We’ll still work, and we’ll still pay into retirement, and we’ll still bring home a paycheck, and we’ll still live as simply and frugally as makes sense for us, but we’ll have enough money that we can literally do anything we want, so long as we don’t want to do everything. If I had $30m in the bank and never had to work, that’d be… Read more »

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Mike Crosby

9 years ago

Financial freedom.

Not worrying about food, shelter, next week, month or year.

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Jason Beck

9 years ago

I love the word “arbitrary.” It seems like so many definitions are exactly that. Maybe the question is “freedom FROM or IN finances.” Perhaps financial freedom is not having finances in your life. If you could do whatever gives you meaning and joy without the thought of money – perhaps you have enough money for that and have automated so much that you only need to hand over money when you’re buying the next experience. Or perhaps you do think about money, but every thought reminds you that you control where your money goes. Freedom is autonomy, control of yourself… Read more »

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Ely

9 years ago

Truthfully, I have financial freedom NOW. I can pay all my bills and travel and go out and enjoy life, and also save some for the future. Yes I have a job, but I like my job and it provides more than just money. It’s not a prison for me. My prison is worry about the future. However, I am taking action; fretting about whether it’s “enough” solves nothing. I simply do what I can with what I have. If more or different action is needed in the future, I will take care of it then, instead of worrying fruitlessly… Read more »

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Budgeting in the Fun Stuff

9 years ago

I like a bunch of the definitions I just saw! I was thinking financial freedom was when we could afford to live as we do now or better without having to work unless we want to…

Debt freedom is my mid-term goal though. We should have no debt other than a mortgage by the end of this month since we’re paying off our last car loan and the mortgage will be paid off in 6 1/2 years…I’ll be a really happy camper when that happens even though I’ll still have to go to work, lol. 🙂

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Suzanne

9 years ago

To me, financial freedom is the ability to say “&*#* you!” to my boss and quit on the spot if things got bad enough. Not that I would ever leave a job in that manner, but knowing that I have options keeps me sane.

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Moneymonk

9 years ago

I define financial freedom as being able to take off work for a year w/o struggling and able to do whatever I please !!

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rwg

9 years ago

In the past I have been in financial prison while making a ‘good’ living, and now find myself more financially ‘free’ while making less money than I’ve earned in almost 20 years. I think financial freedom is mostly about attitude. Freedom means that I have choices, and mostly, choices are about having an awareness of what my choices are. e.g. I bought gas for the car today and when I wrote down the debit in my checkbook and spending notebook (that I carry everywhere) I realized I had not spent any money in almost one week. I also realized that… Read more »

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KarenJ

9 years ago

Financial freedom to me means having choices. I have all the things I need, but I would like to be able to have all the things I want without asking myself if I can afford it. If someone would ask me what financial freedom means to me today, it would be the ability to work part time without money worries. That’s what we’re working toward.

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Kent @ The Financial Philosopher

9 years ago

More great comments! I see a common thread in the definitions of financial freedom: When the worry over money is minimized or removed, one is free. Perhaps this definition may be phrased as “freedom from the concern of (and/or desire for) money?” By framing the definition this way, some people can be free while in debt while others cannot; therefore freedom is a “feeling” or state of mind that may or may not be a monetary function. Personally, I like to define freedom first, then use money as only one tool to obtain it (and maintain it). My definition of… Read more »

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Tyler Karaszewski

9 years ago

For me, “freedom” is a property of a society, not of an individual. It is also a continuum, not a binary value. A freer society is one that tolerates individuals who act in a manner farther away from the status quo. So, an extreme example of a non-free society would be the one in Brave New World, and a much freer society would be one which tolerated all the sorts of behaviors that would be allowed in San Francisco, plus all the sorts of behaviors that would be allowed in rural Texas (which is to say, you could walk through… Read more »

For me, financial freedom is being able to afford what I and my kids need to live. I have this already, so I feel great! Yes I work, but so what? I like my job. I’m working now on funding my kids’ eventual college education so they will have the benefit of an education and choices like I did. Anything else, they’re pretty much on their own because I only prioritize education–ie if they want to get married or buy a house someday they can pay for it themselves. Or maybe I’ll die sooner than planned and then they’ll get… Read more »

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Tina B.

9 years ago

My dad raised 11 kids on a construction workers income through the 80’s and 90’s. His last child finally left home, he worked for a few more years and finally retired. He was diagnosed with Colon Cancer within the year. I encourage everyone to live today, while you’re planning for the future, because there is no guarantee that you will have your health (or life) tomorrow.

I see financial freedom as being able to spend on your true needs and desires (not others definitions) enjoying life today, and not feeling panicky about tomorrow.

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Kent @ The Financial Philosopher

9 years ago

@42 Tyler:

Your comment reminds me of the Rush song, Freewill, specifically the line, “If you choose not to decide, you still have made a choice.”

By virtue of not having a definition of financial freedom, you have demonstrated a free, individual choice; one that is not dictated by a society or conventional definition.

I, too, do not choose to have a definition of financial freedom; I have a definition of freedom but I do not, as you say, “add ‘financial’ as a modifier” to it.

Thanks for provoking thought…

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Landon

9 years ago

I believe financial freedom means living the life that you want on a daily basis. If you have your own business and you have a good handle on it and your finances, then I think you can get a taste of what that feels like. Or you absolutely love your job. Otherwise, I think the traditional definition you provided in your post is the only path. I don’t hate my job, but if I had the freedom to live my life the way that I wanted I would not be stuck in an office or cubicle all day, for 50… Read more »

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Katelyn

9 years ago

I just want to be able to pay all of my bills when they come and not freak out if I have unexpected expenses. I’d like to have some money saved up so that if I have to quit my job, I can, and if someone offers me the opportunity to travel somewhere cool, I will be able to take them up on the offer. That’s about it. I’d like to be able to retire someday, as well.

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TosaJen

9 years ago

I learned the term “financial freedom” from YMOYL, so I stick with their definition when I use the term.

Why do I enjoy and pursue financial freedom? Because it gives me the opportunity to make choices based on my goals and values, instead of compromising too much because I need to make more and more money.

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Nayland House

9 years ago

Financial Freedom to me means – no debt – passive income to cover my living expenses

with this achieved I could choose not to work

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Hi! I’m J.D. Roth. I'm here to help you master your money — and your life.

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